What the re-election of the Coalition means for first home buyers

How the federal election has impacted the property market

Last month Australia went to the polls to vote in the federal election. And, much to the Nation’s surprise, the Coalition clinched a history-making victory.

The re-election of the Coalition has sparked reports that we could see a boost in the property market thanks to the derailing of Labor's plan to restrict negative gearing, raise capital gains tax, and cancel franking credit refunds, all of which were seen as negatives for lenders. The Coalition Governmentis now expected to have an impact on the property market by creating stability and confidence and making housing more affordable.

If you are a first-time home buyer or builder,the re-election of the Coalition could be good news for you. You might be on the property ladder sooner than you thought.

First Home Loan Depositand First Home Super Saver Schemes

During his election campaign, Prime Minister Scott Morrison outlined a plan to help Australians buy their first home. According to The Liberal Party Australia website:

“The Morrison Government believes that all Australians should be able to aspire to own their own home. For most individuals and families, their home is the largest and most important asset they will own.”

“We want to support Australians to realise their aspirations for home ownership and protect the value of their home. We will support Australians in buying their first home and support Australians’ choices on home ownership and investment.”

This sounds like positive news if you’re looking to enter the property market. As a result, the Coalition has proposed two new schemes to help Australians realise their homeownership dreams - First Home Loan Deposit Scheme and the First Home Super Saver Scheme. Both are aimed at making housing and land more affordable.

These two schemesare expected tocreate positive new opportunities for first home buyers.

Since the election result was announced, there has been much commentary about drops in interest rates. On Tuesday (7 June 2019), the Reserve Bank of Australia (RBA) announced a highly anticipated cut to rates dropping the cash rate 25 basis points to an all-time low of 1.25 per cent. The RBA reports that while “credit conditions have been tightened and the demand for credit by investors has been subdued for some time”, there is still “strong competition for borrowers of high credit quality.”

What does this mean for first home buyers?

It means that if you’re with abank or lender who has passed on the interest rate cuts, mortgage repayments have just become more affordable.

As is common with any substantial economic news, there is a counter-argument that theinterest rate cut may disadvantage first home buyers because it will be harder to save a deposit since rates are low (financial institutions also pay lower interest on savings they hold).

But if you already have a deposit saved and buy now, mortgage payments could cost you less. If you purchase a property now, your investment could potentially hold its value as you will be buying in a low market. So now is the perfect time to consider buying your first home, particularly if you have a good credit rating.

With interest rates dropping The Australian Prudential Regulation Authority (APRA) has proposed changing the rules on assessing new mortgage customers. Customers are currently assessed on their ability to manage repayments if the interest rate were 7.25 percent, or 2 percent higher than the loan’s actual interest rate.

This interest rate ‘floor’ was introduced in 2014 in an attempt to contain soaring house prices and investor loan growth.If this constraint were wound back, it wouldpotentially see first home buyers have a lot more borrowing power.

“With interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7 percent floor and actual rates paid has become quite wide in some cases – possibly unnecessarily so," says APRA Chairman Wayne Byres.

“The changes, while likely to increase the maximum borrowing capacity for a given borrower, are not intended to signify any lessening in the importance that APRA places on the maintenance of sound lending standards.”

So, overall, its looking like the re-election of the Coalition is a good thing if you’re a first home buyer looking to get a foothold on the property market. Lowinterest rates along with the introduction of the First Home Loan Deposit Scheme and possible changes to mortgage regulations all create favourable conditions for first-time home buyers.

Photographs on this web page may depict fixtures, finishes and features not supplied by Metricon such as landscaping and swimming pools. Accordingly, any prices on this web page do not include the supply of any of those items. For detailed home pricing, please talk to a New Home Advisor. NSW Contractor's Licence: 174699C (Metro/Southern), NSW Contractor’s Licence: 36654C (Northern), SA Builder's Licence: BLD231776, QLD - QBCC licence: 40992, VIC Builder's Licence: CDB-U 52967.

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